‘Govt will be shortchanged under old mining permit’

The Commonwealth would be shortchanged if the government allowed a joint venture company to remove pozzolan from Pagan at a fixed royalty rate set in 1995, according to PaganWatch.

Pete Perez, a member of the watchdog group, said in a statement that the terms of JG Sablan Rock Quarry’s mining permit would cause the CNMI a great financial disaster.

JG Sablan and its new business partner, the Los Angeles-based Bridgecreek International Corp., plan to use the 1995 permit to conduct mining operations in Pagan later this year.

“By allowing JG Sablan to remove pozzolan at a fixed royalty of $2.50 per metric ton, [the defunct Marianas Public Lands Authority] has guaranteed the loss of many millions in potential revenue to the CNMI,” Perez said.

According to Perez, fly ash, a low quality form of pozzolan, sells for at least $35 per ton. Projections of a worldwide increase in concrete indicate even greater demand for pozzolan and higher prices ahead, he added.

“In this situation of rising demand, the fixed royalty rate of the 1995 permit is completely inappropriate,” he said.

Assuming a production cost of $20 per ton and one million tons of pozzolan sold at $35 per ton, Perez pointed out that the CNMI stood to get only $2.5 million, while JG Sablan-Bridgecreek stood to earn $12.5 million.

At a sale price of $50 per ton, the Commonwealth would still get $2.5 million while JG Sablan-Bridgecreek would rake in $27.5 million.

Furthermore, at a sale price of $90 per ton, the CNMI would again receive $2.5 million while JG Sablan-Bridgecreek would gain $67.5 million.

“That’s for one million tons. It is estimated that there are over 200 million tons of pozzolan on Pagan. The potential loss of revenue is staggering,” Perez said.

Bridgecreek chief executive officer John Carlson, in an email to the Saipan Tribune, suggested that Perez’s assumptions may be unrealistic.

Carlson said that, while fly ash could sell for $35 to $45 per ton in the United States, the cost to ship the pozzolan from Pagan to the western part of the United States could easily be $30 to $35 per ton.

“If Mr. Perez has a buyer of pozzolan who will pay $90 per ton, or $50 per ton, I wish he would introduce him to me immediately. We have retained professionals in the cement/concrete business to search the U.S. for potential buyers, but this may be a long shot. Therefore, the U.S. will probably not be a good customer for pozzolan,” he said.

In China, which is JG Sablan-Bridgecreek’s target market, the initial prices for fly ash range between $10 to $15 per ton, according to Carlson.

Still, he expressed confidence that the joint venture would be a viable operation. He said JG Sablan and Bridgecreek were searching for more specialized buyers in China that would buy pozzolan, which is the cleaner and of higher quality than fly ash, at a slightly higher price.

He also said that the joint venture company was negotiating with construction companies that have their own ships to reduce shipping costs.

Carlson agreed with Perez on the currently huge demand for concrete, attributing this to the construction boom in China. But he maintained that the high demand would not last long, given China’s deliberate efforts to slow new construction.

“Fortunately, there are sufficient projects either already approved or recently under construction, so this boom will last for several years. However, we have a small window of opportunity, and four to six years from now, the worldwide demand for foreign cement will not be increasing, but decreasing,” he said.

Citing a recent study by the U.S. Geological Survey, Carlson also said that there is approximately 30 million metric tons of pozzolan on Pagan, not 200 million.